Stimulus package for Ceylinco, other finance companies

New appointments to Ceylinco companies soon:

The Central Bank of Sri Lanka (CBSL) is currently implementing the stimulus package for the banking, financing and leasing industry which was approved by the Cabinet of Ministers on February 25.

In this regard, the following steps have already been taken within the past week in the implementation of the eight point stimulus package.

Lankaputhra Development Bank Ltd has been appointed as one of the implementing banks by the CBSL and it has already prepared the operating guidelines for the sale of land stocks belonging to registered finance companies (RFCs) and specialized leasing companies (SLCs).

Accordingly, RFCs and SLCs that wish to avail themselves of the facilities as per the stimulus package would be able to access this window shortly. The CBSL has advised RFCs that they would be permitted to reduce the liquidity requirements from 15% to 10% of outstanding term deposits and 20% to 15% of outstanding savings deposits.

The CBSL has prescribed the conditions that would be applicable to RFCs and SLCs which obtain any facilities or concessions under the new scheme in respect of: transfer of funds to related companies; curtailment of remuneration and other incentive payments to directors and key personnel; and the new reporting formats and frequency.

The CBSL is currently finalizing the operating instructions in order to give effect to the Cabinet decision pertaining to repossessed vehicles and equipment in a manner that ensures that such vehicles and equipment are put to productive use, preferably by the original owners.

These instructions are due to be finalized soon and announced by March 14, 2009.

An Expert Group has been appointed as per the Cabinet decision.

The panel group consists of Chartered Accountant, President, Institute of Chartered Accountants of Sri Lanka Nishan Fernando, Attorney-at-Law, Precedent Partner, Nithya Partners and former Director General of the Securities & Exchange Commission Arittha Wikramanayake, Chartered Accountant, President of the Association of Accounting Technicians of Sri Lanka and Additional General Manager, National Savings Bank H.M. Hennayake Bandara and Former President, Primary Dealers’ Association and Deputy Chairman, Browns Group of Companies Ajith Devasurendra.

This Expert Group will advise and assist in the implementation of the eight point stimulus package.

The CBSL has also taken several special measures of intervention in relation to four RFCs of the Ceylinco Group in The Finance and Guarantee Company Ltd, Ceylinco Investment and Reality Ltd, Asian Fiannce Ltd and The Finance Company.

The Merchant Bank of Sri Lanka PLC has been permitted to enter into a management agreement with The Finance and Guarantee Company Ltd., so that the activities of The Finance and Guarantee Company Ltd would be managed and monitored by the Merchant Bank of Sri Lanka PLC. with regard to Ceylinco Investment and Realty Ltd, negotiations are presently under way in relation to the engagement of a suitable managing agent.

The CBSL is closely monitoring the progress of such negotiations.

For Asian Finance Ltd., negotiations are presently under way in relation to the engagement of a suitable managing agent and the CBSL is closely monitoring the progress of such negotiations.

In The Finance Company the CBSL has identified certain key executives who would be entrusted with the overall management responsibilities of this company and these appointments are due to be made within the next two days.

Meanwhile, assessments are made in relation to the current situation so that the necessary interventions can be made by the selected management team expeditiously, under the guidance and advice of the Expert Group.

In the case of the above companies, the Expert Group would be advising the respective management teams of the steps to be taken, while also assisting in the facilitation of the necessary financing support from the implementing bank.

These measures and the quick implementation of the new measures are expected to stabilise the above mentioned companies of the Ceylinco Group in the near term, and as a result, the business operations of such institutions are expected to be restored to normalcy.